HC Deb 28 January 1988 vol 126 cc557-76

Order for Second Reading read.

8.37 pm
The Secretary of State for Wales (Mr. Peter Walker)

I beg to move, That the Bill be now read a Second time.

The purpose of the Bill, as effected by clause 1, is to increase the statutory financial limit for the Welsh Development Agency from the present level of £450 million to £700 million.

The limit was last raised by the Industry Act 1981, when it was anticipated that another adjustment would not be needed until 1989. Present forecasts suggest, however, that the limit will be reached early in the forthcoming year. It is therefore necessary to raise the limit now so as not to inhibit the agency's contribution to the redevelopment of the Welsh economy.

1987 has been a fabulous year, not just for the Welsh economy, but for the contribution that the Welsh Development Agency has made to it. Every year since 1981 lettings of Welsh Development Agency factories have increased, but I am delighted to say that this financial year they will reach an all-time record of 2.3 million sq ft, an increase of 12 per cent, on the previous year. The number of jobs created as a result of those record lettings will also be a record.

In every place that I have visited in recent months, the leaders of local authorities, local Members of Parliament and those interested in the growth of the Welsh economy have all expressed to me their deep desire to have more factories built as speedily as possible. The demand for agency factory space has been so high that the vacancy rate is down to a very small level—a sign of success, but also a sign that more action was needed.

It was for that reason that I decided to increase substantially the Government contribution to the Welsh Development Agency for the coming year, and I have provided it with an increase of 37 per cent. Together with the increased factory rents and sales that are taking place, it means that the total potential expenditure for the agency for this coming year will increase to £113 million — 31 per cent. — more than the budget for the current financial year.

As a result, the Welsh Development Agency has today been able to announce a remarkable factory building programme for the coming year. It has decided to invest in new property developments 40 per cent, more than for the present financial year, a total of £44 million of investments during 1988–89. In 1986–87, £27.6 million was spent on new factory building. When my predecessor sanctioned an increase to between £30 million and £31 million—an increase of between 10 and 12 per cent.— for 1987–88, certain political opponents accused him of doing that as a pre-election exercise. I am delighted that in this post-election exercise there is 40 per cent, more than in the pre-election exercise.

This will create 1.5 million sq ft of working space— 75 per cent, more than in the current financial year and 50 per cent, more than was originally planned. Every part of Wales will benefit.

I have also agreed new mechanisms in which the agency can use its finances to attract a considerable volume of private investment into new factory and commercial building. Seeing the document it has published today must bring pleasure to every part of Wales. South Wales, mid-Wales and north Wales will all benefit from the action programme that we are now free to embark upon.

The provision of factories is but one part of the Welsh Development Agency's role. Another vital role is that of attracting inward investment. I am delighted to say that again we have had an outstanding year of success. WINtech, the Welsh Development Agency's operation for attracting inward investment, is likely to secure 90 projects in the current financial year alone, which will bring in £160 million of capital investment and an all-time record of 7,500 jobs. In proportion to its size, Wales is now attracting a larger proportion of overseas projects than any other part of the United Kingdom. Wales is now regularly attracting one fifth of all overseas projects in the United Kingdom. There are many new projects in the pipeline. Throughout the world there is increasing interest in the potential of investing in Wales.

A further vital role is the encouraging of new business activity within Wales itself. Again it is a record of success. There has been a surge of inquiries for business advice and assistance. The business development unit of the Welsh Development Agency handled an incredible 39,000 inquiries during 1987 — way up on the previous year. That unit will now have the responsibility of delivering the Government's new scheme for consultancy assistance announced last week. We want inward investment, we want new businesses encouraged, we want factories made available, but we also, of course, need the application of new technology.

It was early in 1984 that the Government arranged for WINvest to be commenced by the Welsh Development Agency with the aim of stimulating innovation and better use of technology in Welsh business. WINtech has done exceedingly well in a short time. In this year alone it has assisted 40 companies to take advantage of technology transfer deals, and 50 to embark on advance manufacturing technology projects. It is working closely with the University of Wales and others to assist in the creation of centres of scientific and technological excellence. As a result of the increased funds going to the Welsh Development Agency, the activities of WINtech will expand in the years that lie ahead.

Venture capital and the clearance of derelict land are the two other great objectives of the agency, and here, too, the success has been outstanding. The venture capital division of the agency has invested £47 million in over 700 companies since 1979, triggering a massive investment of £220 million and creating 11,000 jobs. Demand for risk capital is buoyant and the agency is set to invest in 220 companies in this financial year alone. It will be able to continue that activity at an increasing pace in the years that lie ahead.

Wales has much derelict land to clear. Since 1979 the agency has been provided with £130 million of resources at today's prices to clear derelict land. It is one of the largest and most sustained programmes in the whole of Europe. When the £28 million programme announced in July 1986, the biggest ever in Wales, is completed, 9,000 acres of slag heaps and dereliction will have been cleared and replaced to the benefit of the communities concerned. The dereliction of today frequently becomes the development opportunity of tomorrow. Throughout Wales there has been a recognition of the fine work that has been done. The Confederation of British Industry, the trade unions, the local authorities, the Institute of Directors, and the chambers of commerce are all at one in welcoming the leap forward in the activities of the agency that will now take place. Providing more factories, encouraging more new businesses, applying more new technology, removing more derelict land and attracting far more inward investment is the route to transform the economy of Wales and the route to making Wales one of the fastest expanding and successful economies in western Europe.

I urge the House to support the Bill so that the agency can continue its fine work and achieve the objectives that the Government have set it.

8.44 pm
Mr. Alan Williams (Swansea, West)

As the party that established the Welsh Development Agency, there is no way in which we shall vote against the proposal. Indeed, if anything, the way in which the Secretary of State boasted of the achievements of the WDA is a vindication of the stand that we had to take to force the measure through when the Conservative party, including the associate Ministers in his Department at the moment, voted against the establishment of the agency. I hope that we shall at least get some credit for a degree of foresight, with which we were not credited at the time.

When we talk about the amounts of money and changes in the amounts of money involved, it is important that we do not lose sight of the background. Sums of money in abstract can sound enormous, but it depends on the size of the pit that needs to be filled. Despite the Secretary of State's euphoria, unemployment in December 1987 was still slightly higher than in December 1979 despite all the miracles in that fabulous year. Therefore, I advise the right hon. Gentleman that there is still a little way to go and we shall need a lot more money than he is putting forward today.

To listen to the Secretary of State one would not think that 35 per cent, of our young people under the age of 25 are in the dole queue. Of 12 regions, only three have a higher proportion of young people in the dole queue. However, that is not the image that one would gain from listening to the Secretary of State. The spend that the Secretary of State talked about must be considered against that background. Obviously, we are delighted at any improvement, and any improvement is welcome. However, the improvement must be big enough to make an impact on the basic problems. The trouble is that at the moment, as I shall demonstrate, it is not.

One of the WDA's problems is that it will have to operate against what we would regard as the background of inadequate regional funding. The Government tend to ignore that. Indeed, it is interesting that the Secretary of State was the Secretary of State for the Department of Trade and Industry in the early 1970s when that Department set up a regional development grant which, this week, he is in the process of abolishing. The Secretary of State abolishes his own measures, but finds great credit in the WDA and the Labour party's measures. He seems somewhat changeable in his opinions. That regional development grant has been worth £1,600 million to Wales over the years since it was set up. Last year alone it was worth £88 million, but the Secretary of State is planning to abolish it.

Sir Raymond Gower (Vale of Glamorgan)

The right hon. Gentleman has mentioned that the unemployment figures are still marginally above what they were many years ago. Does he agree that the economy is probably more soundly based now than it was then, in the sense that people were then employed in two or three large companies in the engineering industry, for whose products there was little demand in many parts of the world, but now people are employed in a host of new industries, which are forward-looking and have a marvellous chance to expand?

Mr. Williams

It is surprising to note that, at the time when the Government started to impose their miracle on us, that disastrous industry, despite all its shortcomings and warts, was able to earn surpluses of £4,000 million per year in manufacturing trade, whereas now it is making deficits of the same amount in its much more efficient form under this Administration. Those facts answer for themselves.

Turning to the background against which the WDA will be operating, 1987 was the last full year for which we have regional grant figures. I asked the Secretary of State how next year's figures will compare, in constant prices, with those for the last full year that we have. In his reply he told me that the public expenditure White Paper contained planned provision of £111 million for regional aid in Wales for 1988–89. The figure for 1986–87 was £128 million—£17 million more. However, he went on to say that £70.9 million of that covered residual payments for the RDG1 scheme which was ended as a result of the review in 1984. Apparently, we are supposed to ignore the drop of £17 million because there happens to be an element of regional development grant.

The funny thing is that that is in contrast to the view of the Minister of Trade and Industry. When he was challenged on the future of expenditure on regional funds —it was suggested that in future he would be counting figures from a scheme that he was abolishing—he came back with the reply: I trust that he is not seeking to claim that, in talking about the total regional spend … we should ignore … RDG." —[Official Report, 25 January 1988; Vol. 126, c. 54.] So we have the Secretary of State for Wales implying that we should ignore it because it does not suit him and the Minister of Trade and Industry saying that we must count it because it suits him. It might be for the convenience of the House and the public if the two Ministers would get together and at least agree a common line so that we know what we are talking about. Next year, the Welsh Development Agency will be operating against a cut of £17 million of regional assistance compared with last year.

Where, in these depleted figures, is the valleys initiative money to come from? We have heard from the Secretary of State about his intended proposals. We have not seen them yet but I am sure that they will come forward.

Mr. Peter Walker

I know that the right hon. Gentleman has had a copy of the statement and I need not read out the list. An enormous number of new factories will be built in the valleys as a result of the colossal increase.

Mr. Williams

I shall come to the factory building programme in a moment. Surely the valleys initiative comes to more than a couple of advance factories. Is that what it is? Is the Secretary of State seriously saying that, after all that we have heard, the valleys initiative was buried in an announcement by the Welsh Development Agency on its factory building programme?

Mr. Walker

The right hon. Gentleman has a habit of endeavouring completely to mislead and misquote. The remarkable factory building programme announced today for the valleys will bring delight to the valleys. It is a very important contribution to them. I am sorry that the right hon. Gentleman always sneers at good news.

Mr. Williams

I welcomed the announcement, and I shall welcome the factory announcements later. However, I shall put them in perspective. I shall put my own interpretation on them as the Secretary of State does. I sometimes think that the Welsh Office has recruited Hans Christian Andersen to write its press releases. Will the valleys initiative fall within the figures that have been announced, or will it amount to something extra? Will it be a mere reshuffling of money that is already in Wales, as in the case of the so-called money for the WDA? The WDA money is not extra money for Wales; it is money that is being taken out of other Welsh pockets.

None of us would dissent from the assertion that inward investment in Wales is desirable. We have all supported it. Indeed, in fairness, the Secretary of State — according to the press release from the Japanese embassy—was courteous enough to say while in Japan that not only the Conservative, but also the Labour party had for a long time adopted policies which would encourage such investment, and that there was absolutely no problem arising from any political situation which would obstruct the flow of Japanese investment. We would all agree with that. That is what we have said all along. There is nothing new about getting Japanese investment. In fact, the Labour Government probably attracted more than this Administration. However, I do not want to argue figures; it may balance out, it may not. I do not really care, because that is not the issue. We need inward investment to diversify our industry. We have always recognised that. That is why we gave it such a high priority.

It is interesting to note that, despite the priority for inward investment, the WDA told Labour Members that it spends less than 3 per cent, of its efforts on inward investment. We are only too happy that there is to be a stronger effort. I am glad, too, that the WDA is to build some advance factories in anticipation of inward investment. We welcome the three 50,000 sq ft factories specifically earmarked for inward investment. But does that preclude them from other uses? I assume that it would not if a customer came along. The only other factory of the same size in the programme at Deeside is not referred to as being earmarked for inward investment. Does that mean that Deeside is excluded from inward investment? Those are points of detail which I am sure the Minister will be able to answer.

I congratulate WINvest on the latest three Japanese units — someone else's rabbit pulled out of the hat in Tokyo by the Secretary of State. WINvest has been negotiating for one of those units for 18 months or more, and for another for a full year. It deserves every credit for getting them. However, we need to put matters in perspective. We want more Japanese investment and jobs, but the 17 Japanese factories still provide only 5,000 jobs in manufacturing in Wales. We should be glad to have another 5,000, but let us not run away with the idea that is given in press releases that, because one or two Japanese companies are coming, nirvana lies on the horizon. As I pointed out in the Welsh Grand Committee, we need one a day for a year of the biggest factories that the Secretary of State announced simply to replace the manufacturing jobs that we have lost in Wales.

The abolition of regional development grants will not make the job of WINvest and the Welsh Office in attracting new industry into this country any easier. The Secretary of State knows the procedures very well. He knows what happens when a company first comes to Britain, and his officials, too, are well aware of the facts. That is why they have always accepted in the evidence that they have given that regional development grant is an essential component. They know very well that when a company thinks of coming to Britain, the first thing it does is to discuss the general framework of the programme and the aid that would be available.

WINvest and the WDA are normally the first point of contact; the Welsh Office usually comes in towards the final stage. Until now WINvest has been able to say, "For starters, we can tell you that you will get 15 per cent., and, when we see the final shape of your project, you will get regional selective assistance." Now new companies will be told, "Under the Government's scheme now in operation, we are to give you the smallest amount of money that we can give you to get you to come here." That is not exactly a strong inducement to inward investment.

It was for the same reason that, in a recent speech, the right hon. and learned Member for Richmond, Yorks (Mr. Brittan), a former Chief Secretary to the Treasury and a former Secretary of State for Trade and Industry, made the same point about the importance of that element of predictability. It is a major loss, in terms of negotiating for inward investment, that that predictability has gone. Another element of predictability has gone with the number of changes that we are experiencing in regional aid.

When I looked at the figures in the White Paper, I was encouraged to see that this year the Welsh Development Agency hopes to clear 438 hectares of derelict land. I think that that is the largest clearance that it has ever achieved. Those who represent the old industrial areas are only too pleased that that will happen.

The problem is that about 13,600 hectares of land need clearing in Wales. We do not know the precise figure— there was no survey in 1982, as there was in England, because for some reason the Welsh Office cancelled it— but it is about that level. Even with that record level of land clearance, it will take until 2020 to clear the existing dereliction in Wales. That overlooks the fact that new dereliction is being added year by year. Every time a pit closes—the Secretary of State knows a lot about that— another derelict site is created that will have to be cleared.

An interesting feature is the disparity in spend on these issues between Wales and England. As one would expect, England has two and a half times more derelict land than Wales. Since 1982, or 1983, England's spend has been five times greater than that of Wales. It is putting much more effort into clearance than we are in Wales. I hope that the Secretary of State will bear that in mind when determining the size— [Interruption.] Those are not my figures. The figures for the amount of derelict land that needs to be cleared came from the right hon. Gentleman's predecessor. The figures of spend and for the amount of derelict land that is being cleared are available for the right hon. Gentleman to check.

I am only too happy about today's announcement of 1.5 million sq ft of factory space. We must bear in mind that Wales has a company liquidation rate of one a day throughout the year. We need extra factories, and we are delighted that at last that fact has been recognised by the Government.

It is interesting to note that the 1.5 million sq ft that the Secretary of State talked about is still way below the level for 1981–82, when it was 2.6 million sq ft. There is a long way to go before we return to previously attained levels. We welcome today's announcement as a move in the right direction.

The WDA works within the framework set by Government aid for the regions. We have already said that we regret that regional development grants will be abolished. We feel that that will have a serious impact.

I want to repeat what I said about the new scheme in a debate on Monday. I am concerned that the new scheme for regional investment grants will be grossly ineffective compared with the scheme that it is replacing. The strategy of the WDA and of the Government, other than the occasional large mobile unit — I am not criticising the Government because there is not much mobile industry in Wales—is to concentrate on small firms. Some 80 per cent, of regional development grants already go to small firms. Until the end of this financial year, regional development grants are available at 15 percent, on capital, or £3,000 per job created. Under the new scheme, that generous level will be cut to 15 per cent, up to a ceiling of £15,000 and a maximum of 24 jobs. The £3,000 will become £625, and that £625 will be taxable. That is bound to have a significant impact on the number of jobs created.

I shall remind the right hon. Gentleman, as I reminded the Minister of Trade and Industry in the debate on Monday, of an answer that I received from the Under-Secretary of State for Trade and Industry. I asked about the new scheme and how it would be monitored to ensure that it delivered new jobs. The Secretary of State for Wales said, in essence, that the new scheme will be more efficient in job creation. The Under-Secretary said that the creation of jobs would not be a condition of the new regional investment grant, but the scheme was expected to have a beneficial effect. In other words, it is not anticipated, even by the Government, that it is going to be a major job creator, and it is not going to be closely monitored against the number of jobs, according to the Under-Secretary of State for Trade and Industry.

The final point relates to Government funding. The funding that we have heard about today in relation to the WDA is simply money taken from one part of the Welsh budget and transferred to another. The amount of assistance that is going to be given by the Government next year at current prices is £62 million, which the right hon. Gentleman presents as this marvellous achievement as far as the WDA is concerned. But the fact is that in 1978–79, at modern prices, the WDA was receiving £16 million more than that—that is, 25 per cent, more than it is receiving at the moment. In 1979–80 it was receiving £12 million more. In 1980–81 it was receiving £34 million more — 50 per cent, more than the figure that he has announced. In 1981–82 it was receiving £40 million more — 60 per cent, more than the figure that he has announced.

Mr. Peter Walker

The right hon. Gentleman knows full well that there was specific identified payment for certain steel closures which was totally out of the main-line spending of the WDA. The first small package was announced by the Labour Government as a specific commitment. I am glad to say that the succeeding Tory Government put in far more for that specific purpose. The right hon. Gentleman knows that he is totally misleading the people of Wales. He has his research assistant produce all of these statistics for him to try to create a picture that more is not being done, but he knows that a lot more is being done.

Mr. Williams

The right hon. Gentleman has a rather perverse way of deciding what he is willing to accept as evidence. That was the contribution that the Government were making to the activities of the WDA. The WDA was not there just to deal with steel, although it did deal with steel. I remember that in the Welsh Grand Committee the right hon. Gentleman actually had the cheek to interject and complain about the regional development grant figures that I was using for Labour's period in office. He said that it was unfair to quote those because they included Ford. Ford helped our figures, so we should pretend that it never happened and take it out of the figures. Here, because the money his own Government were spending some years ago was far more than what they are spending today, he now wants us to pretend that it never happened. It did happen, it is on record, and his efforts are rather puny by comparison.

We want to see the WDA properly funded because we set it up. It was opposed by the Tories, who have clearly become very reluctant converts. Even today, despite the claims of the Secretary of State, by the standards of past achievements the WDA remains starved of funds and essentially it is starved of funds to deal with the problems that it faces.

9.7 pm

Sir Raymond Gower (Vale of Glamorgan)

I think that the right hon. Member for Swansea, West (Mr. Williams) is over-simplifying the issue of the funding of the WDA. In its early days, it is true, it put money into a definite project and there was no inflow at all, but the money that is now being deployed is used again and again. It is a different ball game. The WDA is in the nature of being a financial organisation as well as a development organisation, and any big financial organisation deploys its funds and uses them to the best advantage over a period. I think that the right hon. Gentleman should take account of that.

Further the right hon. Gentleman grossly under-stimates the value of the Welsh Development Agency having acquired an expertise which it did not possess, obviously, when it was initiated. It is now able to prepare a package that is attractive to an investor either from abroad or from another part of the United Kingdom. That should not be underestimated in our assessment of the value of the WDA.

As my right hon. Friend said in his opening remarks, this is a relatively small measure with a limited but valuable purpose. Is the Welsh Development Agency of value to the Welsh economy? The answer must be in the affirmative. The right hon. Member for Swansea, West understandably took the credit for the fact that his Government initiated the agency. Some of my right hon. and hon. Friends had doubts about it at the time because it was a new venture and no one was sure what would emerge. I do not suppose that those who set up the agency imagined that it would develop as it has done. They could not predict exactly what would happen. My right hon. Friend the Secretary of State has catalogued its successes and achievements, but the right hon. Member for Swansea, West is trying to play down a surprising achievement.

In spite of the difficulties, this has been a time of great recovery, but the Labour party does not recognise the extent of it. In Wales the recovery has been more surely based than we could have foreseen. It is dangerous for the right hon. Member for Swansea, West to be over-critical, because other parts of the United Kingdom are jealous of what we have in Wales. If he continues in that vein, he will encourage feelings of apprehension in those parts of the country which believe that they are not getting a fair crack of the whip. I assure the right hon. Gentleman that people in the north-east of England feel hard done by because they have no comparable instrument there. We must be careful how we approach our debates on these matters.

The Welsh Development Agency has contributed to the remarkable achievements in Wales. It is difficult to envisage Wales today without the agency. That is a mark of its success. Without the agency, the task of providing new factories would be much more difficult. Without the agency, we should not have had 1,278 advance factories in the nine years up to last March. It is difficult to imagine how that could have been achieved without the agency. It would have been equally difficult to promote inward investment without the agency and its associate WINvest, which was initiated by this Government. It is worth noting that since WINvest was initiated the remarkable number of 223 projects from overseas have been established. Before Christmas my right hon. Friend the Secretary of State announced a £2.5 million factory building programme, which underlines the WDA's contribution to this work.

We also welcome today's announcement of the agency's new property programme. This provides hope for the valley and rural areas, on which the hon. Members for Brecon and Radnor (Mr. Livsey) and for Ceredigion and Pembroke, North (Mr. Howells) have commented. The improvements are not confined to the industrial areas, but are spread, as my right hon. Friend said, over the whole of the Principality.

Factories will be purpose-built for specific clients, and I hope that there are plenty of them, because the order must be placed before the factory is erected. Reference has also been made to the advance factories, and in the years that the WDA has existed providing those factories have been its main job. The building of advance factories has been accepted throughout the Principality by all parties as extremely desirable. Starter units may be regarded as one of the most important developments because they tend to assist smaller ventures, and I believe that such ventures and small firms are of particular value to the Principality today. Indeed, there is one in my constituency — the Lion laboratory at Barry. It started in a modest way, making breathalysers, but it now employs a much larger work force than it did even a short time ago. I believe that an organisation of that size has within it the seeds of growth and could provide valuable employment.

I am slightly worried about the lack of building for high technology projects. I do not believe that we have made so much progress as is desirable in this area. I believe that we could lose if we do not have a fair share of such high technology factories and, indeed, Scotland has pushed ahead in that regard. I hope that the Welsh Office and the WDA will devote extra attention to that matter. I believe that high technology is possibly the most important area of all in the context of the present economy, here and overseas.

The right hon. Member for Swansea, West referred to the clearance programme, and this is vital. I note that the garden programme in Ebbw Vale, which is similiar to the one on Merseyside, has been expanded, and I hope that that will be extremely successful. The right hon. Gentleman knows more about it than I do, but I believe that it is being developed sensibly and steadily.

There is one thing that I believe the WDA should do that it has not had the time nor the resources to do in the past. It should assist in the creation of something that we have always lacked in Wales—a capital market and a financial centre. That has always been a tremendous defect. Some years ago Sir Julian Hodge created an organisation that appeared to be something that might have grown into something large. Unfortunately, it did not realise the hopes that had been expressed for it. I hope that that lack will be considered as an urgent need. It is one of the reasons why it was necessary to have the WDA. We did not need it only for factory buildings. We needed it also because we lacked a financial market and financial centre. The provision of those facilities could round off the marvellous achievements of the agency.

As the right hon. Member for Swansea, West has painfully told us, we should not exaggerate unduly what the agency has achieved. I do not think we should say that all is well. However, I hope that the right hon. Gentleman will agree that the prospects for the agency in the next two years are incredibly brighter than they were even a couple of years ago. We should be encouraged by that. Therefore, when the House passes the Bill — I hope, as the right hon. Gentleman said, without a Division—we will feel that we are giving the WDA a pat on the back and hope for the future.

9.19 pm
Mr. Gareth Wardell (Gower)

I agree with the hon. Member for Vale of Glamorgan (Sir R. Gower) about high technology. A worrying feature of the local economy of West Glamorgan is the county's seeming inability to attract true high-technology industry. Cambridge university research has shown West Glamorgan to be sixth from the bottom of the county league in terms of relative concentration of high-technology industry throughout England, Wales and Scotland. Those with a lower ranking were the Scottish islands, Powys, south Yorkshire, Dyfed and Shropshire.

High-technology jobs are distributed across Britain, with a distinct bias in favour of the south. I agree with the hon. Gentleman that unless we are very careful and attract the high-technology firms to Wales we shall have an additional element in the north-south divide, with a notable absence of high-technology firms in Wales. We must guard against that.

I hope that in winding up the Minister of State will explain another vital element in the background against which the Welsh Development Agency is now to operate. It seems that there is an anomaly over the new regional investment grant for small firms. Why should that grant apply only in the development areas, and not in the intermediate areas? In other words, why do not all the assisted areas qualify for the new initiative? There is another point, concerning the importance that the Secretary of State attaches to the WDA relative to the Wales Tourist Board. Whereas the WDA's property development programme is to increase by 42 per cent, between this year and next, the Government's relative contribution to the board is pitifully small. The relative lack of priority that the Government are giving to the industry is a disgrace.

Here I wish to refer to the memorandum by the Midland Bank pic Advisory Council for Wales, starting on page 622, in appendix 82, of the minutes of evidence to the Committee on Welsh Affairs when it considered tourism. The council said: the disparity between the level of assistance to the tourist industry and to manufacturing is enormous … the Select Committee are invited to consider whether the balance is still not tilted unfairly against tourism, bearing in mind the importance of tourism to the Welsh economy and, more particularly, the contribution it can make in terms of creating jobs. I do not want to concentrate on the inward investment of people as opposed to the inward investment of capital. But I am sure I speak on behalf of the whole Committee — because we made firm recommendations on this — when I say that the Secretary of State has made matters much more difficult for the board by still insisting that it shall not promote Wales overseas independent of the British Tourist Authority, as Scotland does for itself.

I turn to the main part of my speech, which concerns the relative contribution of regional development grant and regional selective assistance. Before 29 November 1984 90 per cent, of the working population of Wales lived in assisted areas to which the grant was applicable. That then changed to 35 per cent., and it will now be zero—a major change. Its importance for the WDA was summed up in the evidence to the Select Committee when we did our major study of regional industrial policy in 1984.

I wish to quote one of the chief Welsh Office officials. As he comes from Trimsaran I am glad to say that he has been promoted. I am sure that his elevation is in no small part due to his marvellous contribution, in answer to question 141, page 47, in the evidence to the Select Committee on 14 February 1984. It is worth quoting him to show the position of the Welsh Office which I am sure has changed little since. He said: Predictability is an important element. All the available research points to the conclusion that at the stage of investment decision-making a company needs to know what automatic assistance it will attract. It may recognise at that stage that over and above that basic level of assistance it may also be entitled or may also be offered a measure of topping up assistance of a discretionary character. Here we have the major Welsh Office official, Mr. Owen Rees, making clear in 1984 the view of the Welsh Office on regional development grants.

I do not want to leave the WDA out completely. I will quote what the present chief executive said. Of course, he was the chief executive when the Select Committee conducted its inquiry in 1984. In question 266 on page 87 of the evidence to the Select Committee on 29 February 1984 I asked Mr. Waterstone: How can you have on the one hand selectivity and on the other certain automatic assistance? He gave a brilliant reply; no doubt he still holds the same view despite comments that he has made in a glossy magazine which probably cost far more than the 85p for the Bill. His reply to my question was: To put it crudely, you need the automatic element as a groundbait to attract the fish and have the selectivity to hook him at the lower cost to yourself. That is the crucial point made by the chief executive of the WDA, a senior Welsh Office official and, of course, in a famous document produced for the Department of Trade and Industry in 1984 by Neil Hood and Stephen Young entitled: Multinational Investment Strategies in the British Isles". It seemed to have limited circulation but, hopefully, it is now available from Her Majesty's Stationery Office. It is a seminal document of research evidence. I want to quote one passage to the Minister in case he has not read the document. On page 169 it says: In evaluating the influence of regional incentives (RDG and SFA) more deeply, it is necessary to consider entry methods, since companies entering through acquisitions would be unlikely to attribute any influence to financial assistance. Although not shown here, this comes out clearly from the data: of the 57 greenfield entrants in the AAs, 42.1 per cent, viewed RDG as "very important" and 24.6 per cent, "important" — meaning that two thirds of those building from scratch considered regional development grants as of some significance. The same general pattern applied, albeit much less strongly, for selective financial assistance: here 26.3 per cent, of greenfield entrants rated SFA as important or very important. Will the Minister tell the House what new evidence— different from the seminal document produced by the DTI and different from what was said by the chief Welsh Office adviser and the chief executive of the Welsh Development Agency—he has, with the wealth of knowledge of the DTI and the Welsh Office behind him, to demonstrate clearly that RDG is no longer necessary as a groundbait to hook the fish? Although I am not a fishing man, the message is loud and clear. The Opposition demand evidence to prove that the situation has fundamentally changed and that the incentives that the Government are offering are no different from what they were before. Unless the Minister can do that, we shall feel very concerned and very cheated.

9.30 pm
Mr. Keith Raffan (Delyn)

I congratulate my right hon. Friend the Secretary of State on the major increase in resources for regional and industrial assistance that he has obtained — an extra £54 million for the next financial year, representing a massive 39 per cent, increase, together with a promise of further substantial increases in the next two years.

Perhaps the most important component of that package is the increase in the total Government provision for the WDA of one third in 1988–89, allowing, as the Western Mail put it, a major boost for factory building. That was announced in detail earlier today.

Last September I wrote to the chief executive of the WDA, David Waterstone, expressing my concern at the lack of factory space in Clwyd. He replied: We are becoming the victims of our own success and the vacancy rate in our estates throughout Wales has now fallen to below 9 per cent., whereas we have always argued that we cannot fall below 10 per cent, without the efficiency of our investment-attracting activities being impaired. The WDA is the victim of its own success.

Mr. Rhodri Morgan (Cardiff, West)

Will the hon. Gentleman give way?

Mr. Raffan

No. I shall finish my point and then I shall be delighted to give way to a short intervention from the hon. Gentleman, as I am making a short speech.

In the current financial year the WDA is on course to let up to 2.3 million sq ft of factory floor space. That is well up on the record level achieved in 1986–87.

Mr. Morgan

Has it occurred to the hon. Gentleman that there are two possible explanations for the shortage of factory space this year? One is that two years ago not enough factories were started to be ready now. The hon. Gentleman has given the other explanation.

Mr. Raffan

The hon. Gentleman does not want to face the truth, as excellent news for Wales is bad news for his party.

The economic upturn has created that difficulty for the WDA. The WDA and the Government have successfully faced that difficulty today, and that has thrown Opposition Members into a tremendous pickle. They are playing around with statistics, picking them out at will to try to demonstrate that they spent more than we did, when everyone knows that they did not.

In addition to what I said about factory floor space and the tremendous achievements during the current financial year, there is now to be a massive increase in WDA investment in property development of more than 40 per cent, in the next financial year, making a total of £44 million. That will create 1.5 million sq ft–75 per cent. —more space than in the current financial year, and 50 per cent, more than originally planned.

Before today's announcement, despite the significant extra investment made in the factory building programme recently — it has been significant compared with the Opposition's record—the economic upturn has created capacity constraints in certain localities, not least in north-east Wales. I hope that Opposition Members will agree that the massive increase in resources for the WDA property programme announced today will help to ensure that no investment opportunity will be lost in future because of the non-availability of suitable factory premises.

I wish to make three points about the WDA factory building programme. The first is about where the factories should be provided in north-east Wales. The largest concentration of the agency's factory units in Clwyd is in the districts of Wrexham Maelor and Alyn and Deeside. The WDA property portfolio currently shows in Wrexham Maelor 96 units covering 973,564 sq ft and in Alyn and Deeside 110 units covering 889,545 sq ft.

That is in sharp contrast to Delyn, which has just 47 units, covering 248,000 sq ft, and Rhuddlan, which has only 17 units, covering 182,079 sq ft. The figure for Rhuddlan is actually less than in 1985, when the figure was 198,000 sq ft because of the demolition of temporary accommodation in Kinmel industrial park in the constituency of my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer).

The WDA has conceded that to some extent development in north-east Clwyd has centred on Deeside industrial park, which", it says, serves a wide urban catchment. That concentration in Wrexham Maelor and Alyn and Deeside will continue even with the WDA's revised property development programme which has been published today.

I am grateful for the major inward investment property project at the Delyn enterprise zone, but there is still too much concentration of property development in Wrexham Maelor and, indeed, in Alyn and Deeside. I shall not encourage an intervention from the hon. Member for Clwyd, South-West (Mr. Jones), who I see in his place, but I could have given the figures for Glyndwr. I am sure that he too would like a few more units.

The Deeside industrial park and the Wrexham industrial estate do not provide an answer to the intense highly localised problems of unemployment in my constituency. As I said when we debated the WDA last in the Welsh Grand Committee on 21 May 1986, the journey from Hollywell to Deeside industrial park, in Alyn and Deeside, is a 26-mile round trip, and the journey to Wrexham industrial estate is a 40-mile round trip. Public transport locally is far from satisfactory, and those living and working in Delyn are largely in the low-income bracket, so that transport costs can represent an intolerably heavy burden on their wage packets.

If accessible location is not a sufficient reason for the WDA now to correct the imbalance and provide more factories for Delyn and coastal Clwyd, closer to those out of work, surely credence must be given to the argument that Alyn and Deeside, and to a lesser extent Wrexham Maelor, are, because of their geographical location, more attractive to private investment. In those areas, commercial pressures are more likely to trigger private investment, and that is not so true of the less accessible, less industrially attractive Delyn and coastal Clwyd, where public sector pump-priming is more necessary. I hope that the property development grant announced today will increasingly recognise that.

The WDA emphasis must move away from south-east Clwyd to Delyn and coastal Clwyd. The Clwyd structure plan revealed a shortage of land for industrial development in that area. Although by the time the structure plan was reviewed there had been an improvement, coastal Clwyd still has the lowest proportion of industrial land in the county, and it still needs more.

Unemployment in Prestatyn remains high, less seasonal than it used to be. The round trip to Deeside industrial park from there is at least 45 miles. We need more industrial development on the coast.

The problem is land and, more to the point, getting our hands on land that could be used for industrial development. I know that the Government have encouraged local authorities to release land that is surplus to requirements; but there is a need for similar encouragement, and, if encouragement does not work, pressure, on the public sector or on those who have just left it. I would refer to two examples of protracted—far too protracted — negotiations with Wales Gas and British Rail in Prestatyn to get them to release surplus land.

Secondly, we need to achieve a much better balance between public and private sector investment in factory building, which today's announcement will help to bring about. That is not easy, as the industrial development officer of Clwyd, Derek Griffin, said in a letter to me last September: Involving the private sector in building advance factories is not as easy as has been suggested in some quarters … the problem lies in the rental levels that can be achieved against the returns required by investment funds. That point has been acknowledged by the chief executive of the WDA — David Waterstone — who has been quoted so much by the Opposition today. But he took a more positive and determined line in a letter to me when he said: You may be glad to know that we are currently working on a number of schemes designed to raise private capital for industrial and commercial building in Wales. I am sure it is necessary, and indeed desirable, for us to find a means of supplementing Government funding. The WDA's announcement today shows that those schemes have come to fruition, and I am glad that the Delyn enterprise zone has been chosen as one place where they will be tried out. I welcome all aspects of the private development initiative, particularly the property development grant, to fill what is called "a viability gap" that could otherwise prevent an industrial development from happening.

Many will agree with Mr. Waterstone that private sector investment is not only necessary but desirable. I know that Delyn borough council believes that there is a real need for the Welsh Development Agency to play a key role in ensuring private investment in factory units, not only through property development grant, but through a rent guarantee—another way to tip the balance so as to ensure private sector investment, which would not otherwise happen because of a much greater growth in values of industrial property elsewhere.

Thirdly, there is a need for a balance between advance factory units and bespoke, tailor-made units. The pros and cons of this were discussed in the debate on the WDA in the Welsh Grand Committee, to which I referred earlier. Different local authorities put the emphasis differently. Clywd's emphasis is on the urgent need for a range of new advance factories to be built to meet the demand and maintain the momentum of attracting new companies to the county. Delyn borough council, from its experience as a landowner and planning authority for the Delyn enterprise zone, puts the emphasis on the need for bespoke, tailor-made units for particular companies.

We need both types. We need a variety of advance factories of 5,000, 10,000 or 15,000 sq ft, but the dangers of building advance factories in sizes larger than that are that they can remain empty for a long time and they are of a standard type that is unsuitable for certain industries, such as electronics.

The dramatic increase in funding made available today should enable the WDA to move quickly to build tailor-made units, designed to meet the requirements of major inquiries. It is often more cost-effective to build tailor-made units than to undertake costly alterations to existing advance factory units. Such tailor-made units can also be built very quickly, within the relatively short period of three to six months. I am reassured by today's announcement that the WDA will continue to give the highest priority to constructing bespoke units for specific clients. It is an area in which the agency has been conspicuously successful in recent years.

Even before this announcement, the targeted level of new build was approximately 50 per cent, higher than that achieved during the period 1976–77 to 1978–79. Now we have, in the words of the chief executive of the WDA, a radical strengthening of the WDA's resources and of the capabilities of the Agency in the industrial property sector.

Excellent news. he rightly described this.

I only wish that David Waterstone would pass on his ability to recognise excellent news for what it is to the right hon. Member for Swansea, West (Mr. Williams). All this good news—today's 40 per cent, increase in the WDA's property programme; the 33 per cent, increase in the overall provision for the WDA; the 39 per cent, overall increase in regional industrial assistance for Wales—has put the Opposition in a right pickle, because excellent news for Wales is bad news for them.

The great mistake of the right hon. Member for Swansea, West was to anticipate, prior to the original statement on regional assistance, an announcement that was never made: Planned changes to Government aid packages will hit new business development in Wales, claimed the shadow Welsh Secretary in the Western Mail. Labour MPs are to demand a special Commons statement … spelling out the implications for Wales of wholesale changes in the administration of regional aid to industry", thundered the Western Mail again.

We have not heard much of that, not since that Western Mail leader headlined "Remarkable Victory for Walker". We have been left instead with the delectable sight of the right hon. Gentleman limping backwards in full retreat, trying to gather together the tattered remnants of his own credibility with a phrase that will long live to haunt his parliamentary annals: If there is an increase, he spluttered, it is in relation to cuts that they were envisaging". I say to my right hon. Friend the Secretary of State, that he has won, not on points, but on a knock-out. I say to the Labour party that if the present shadow Secretary of State was its third choice, let us have its fourth.

9.43 pm
Mr. Geraint Howells (Ceredigion and Pembroke, North)

From my experience in the House—and I have been here a few years — I hold the view that each Secretary of State for Wales in turn deserves credit now and again for what he does for his country. Tonight I take the view that the present Secretary of State deserves to be congratulated on his efforts in fighting for his corner of Wales. It would be very churlish indeed of me and of others if we were to criticise the increase in development money that has been promised to the WDA and the Mid Wales Development Board. I know that the Welsh Development Agency and the Mid Wales Development Board are reasonably happy with what they are receiving. If memory serves me right, they will be getting about £54 million extra of Government money, although the point has already been made that the total falls well short of the value of the regional grant to Wales in 1980.

I welcome today's announcement that there will be a substantial expansion in the Welsh Development Agency's property development and that the agency is now in a position to fulfil all the factory building that it had planned. If that can be done in the years to come, it will be a wonderful achievement, whichever party is in Government. It is important that the excellent work done by the Welsh Development Agency and the Mid Wales Development Board should receive every encouragement. It is refreshing to see a Secretary of State for Wales in this Government acknowledging the value of public spending at last. I hope that he will, in his wisdom, try to persuade the Secretaries of State for Education and Science and for Social Services that there is need for more money to be spent in the public sector. The Secretary of State for Wales has given a lead tonight and I hope that his ministerial colleagues will take heed of what he has done.

However, I want to sound a warning. Although I appreciate that we need to remedy the shortage of factory space and regenerate urban areas and industrial valleys in Wales, there is a danger that not enough money will find its way to rural Wales, to areas that have suffered equal deprivation and equally high levels of unemployment. Unfortunately, the Teifi valley between Cardiganshire, Pembrokeshire and Carmarthen — I do not blame this Government more than the previous Labour Government for this—has had unemployment for the past 15 or 20 years of between 24 and 26 per cent. — the highest in Wales. Something must be done to try to cure that problem.

I urge the Secretary of State to consider giving more funds to the Mid Wales Development Board, in view of the massive problems facing the area that it covers. It should also be given wider powers, and the area that it covers should be extended to include at least north Pembrokeshire. I have consulted members of the local authorities in north Pembrokeshire, who have problems comparable to those in the mid Wales area. It would be a step in the right direction if one of our ports — Fishguard—were to come under the jurisdiction of the Mid Wales Development Board. That is food for thought, and I hope that everyone concerned in the Welsh Office will give further consideration to it.

Eventually, I want the Mid Wales Development Board to become an organisation that will cover the whole of rural Wales—a body that could ensure that rural Wales received its fair share of help from the Government. It could be a development board that would safeguard the interests of our language, heritage and culture. Something should be done about it and more consideration given to that thought of mine and of others.

The Secretary of State will be aware, I am sure, of one particular problem facing people in my constituency at the moment. I refer to today's announcement of the closure of Felinfach creamery, with the loss of more than 100 jobs. That is a real body blow to the economy of Ceredigion and mid Wales. I urge the Secretary of State tonight to take urgent action on this matter. I suggest that he should convene and attend a meeting between the Welsh Office, the Welsh Development Agency, Dyfed county council, Ceredigion district council, the National Farmers Union and the Farmers Union of Wales to discuss and set plans in motion to create jobs to replace those lost at Felinfach today. Unless that is done immediately, I believe that there will be dire consequences for the area and the community as a whole.

I beg the Secretary of State—or the Minister when he replies — to give that assurance to the people of Cardiganshire and the employees at Felinfach. I want to make a plea on behalf of the hon. Member for Ynys Môn (Mr. Jones). We went to see the chief executive of Dairy Crest at the beginning of the week. Unfortunately, neither of us was able to persuade him. The hon. Member for Ynys Môn has a problem at Llangefni in Anglesey similar to the problem that I have in Felinfach. When the Minister replies, I hope that he will give that assurance to both of us.

9.50 pm
Mr. Gwilym Jones (Cardiff, North)

I start on a note of welcome especially for the blinding light on the road to Damascus conversion of the right hon. Member for Swansea, West (Mr. Williams). I was amazed to hear him say that he was delighted to learn of any improvement. If I wrote his phrase down correctly, he said that he felt that we still have "a little way to go" in the economic regeneration of Wales. At the very least, I would agree with that. Is that the first tangible or only tangible result of the new campaign, "Labour Listens"? What a pity he had to spoil it by carping on about the figures. Again, I made a note of what he said. He said that he would "transpose the figures in his own image." I hope that the right hon. Member for Swansea, West will junk that second-hand word processor that he has been using and that we will see more of his new positive approach at Welsh Question Time or in other Welsh debates.

Mr. Morgan

Perhaps, in assessing the nature of the demands made by my right hon. Friend the Member for Swansea, West (Mr. Williams), the hon. Gentleman forgets that, with half our steelworks closed down, we now have to go in for iron mining in Wales.

Mr. Jones

The hon. Member for Cardiff, West (Mr. Morgan), who is my constituency neighbour, did not follow my point when I said that I would agree with the right hon. Member for Swansea, West that there was still "a little way to go".

I welcome the Bill. The House will welcome the Bill as it increases the financial limits for the Welsh Development Agency approximately one year earlier than was originally expected. In welcoming it, I congratulate my right hon. Friend the Secretary of State on having approved a 40 per cent, increase in property investment for the Welsh Development Agency. All of us would agree that, at the very least, that was necessary. There is tremendous demand for WDA property, and that is a signal pointer to the progress of the continued economic revival of Wales.

In turn, I want to extend my congratulations to the Welsh Development Agency on achieving a letting record of 204 million sq ft in 1986–87. The vacancy rate at the same time was below 10 per cent., and that is equally noteworthy. Is that not a far cry from the position in years past when Labour Secretaries of State for Wales scuttled around Wales announcing and opening new vacant advance factories? The trouble was that all too often that is what those factories remained—new, vacant advance factories.

Much good, interesting and exciting work is being done by and with the Welsh Development Agency. However, that is not always the comment that I hear from others. Perhaps others do not give the WDA the same consideration as we give to it. However, Members of Parliament frequently encounter the impression that, if the applicant for help represents large inward investment, everyone involved — the Welsh Development Agency, among others — will do everything possible to try to secure that investment. Naturally, that is what we should do; the trouble is that it seems to be thought that, if the applicant for help is a small indigenous company in Wales, it will not get all the help that it needs.

That is a strange picture, in view of some of the less well-publicised achievements that have been made. Earlier today I noted that professional advice had been given to some 7,700 companies; that a similar number of individuals and companies had received first-time counselling services; that over 1,000 people had received training in business enterprise; and that the small firms centre had responded to 39,000 inquiries from 22,000 individuals and companies. The reality is often different from the perception or the image. We must have regard to that question of image, not solely from the public relations point of view, but so that there are no missed opportunities for those who are contemplating a small expansion or— equally valid—those who need assistance before trouble gets worse.

We need to ensure that everyone is aware of the help that can be offered by the WDA, and that no opportunities of seeking that help are missed. In the last few months, I have received complaints about missed opportunities involving WDA land in south Cardiff, which is part of the proposal for the redevelopment of the docklands. Developers have come to me saying that they have missed opportunities, and that some of them have gone elsewhere because of the present standstill in the Cardiff docklands, which includes WDA land. The WDA is co-operating fully with the Cardiff Bay Development Corporation as the plans are drawn up for the exciting scheme for the redevelopment of south Cardiff. In the meantime, however, there is a standstill and the real possibility of development opportunities being lost.

One complaint that I have received comes from a quarter referred to very positively in the WDA's property development programme, with which all of us, I believe, have been circulated today. Naturally, a question of balance is involved. The proposals for development — which are obviously still tentative, because they never reached the final stage — must be weighed against the need to ensure that the entire plan for the redevelopment of south Cardiff is right.

In all my contacts with the Cardiff Bay Development Corporation, I have been impressed by the corporation's approach. It has a healthy "get up and go" attitude of wanting to take the scheme forward and achieve as much as possible. I have been assured that the planning process will be swift, and I trust that it will be; that we shall have no cause to regret the present standstill; and that, from the earliest stage, every possible assistance will be given to developers, so that we can hear the least possible talk of missed opportunities.

Last week, the Cardiff Bay Development Corporation announced the possibility of the use of compulsory purchase orders to achieve the scheme for docklands redevelopment. That also may affect the WDA's land holdings. Inevitably, any prospect of compulsory purchase orders arouses controversy and concern. In my post this morning, I received a letter from the community support anti-waste scheme, whose members are very worried about the possibility of having to move from their present location at the abattoir in Cardiff. I know of their work in various recycling activities. They say that it would be catastrophic is they were to lose their present site and have no alternative location.

I have been impressed not only by the "get up and go" approach of the development corporation, but by the fact that its planning approach is meant to be flexible. I very much hope that it will be so. However, as it moves forward in redeveloping south Cardiff, I believe that compulsory purchase orders should be used sparingly. Where there is full-hearted co-operation between the landowners, including the Welsh Development Agency, and where it is possible for both parties to go down the road together, I hope that they will do so without unnecessary compulsion so that all will benefit from the south Cardiff development.

Finally, in response to the hon. Member for Gower (Mr. Wardell)—

It being Ten o'clock, the debate stood adjourned.